Diligence - how creditors can enforce debts

 November 2016

Fact sheet no. 04 SCOT Diligence - how creditors can enforce debts

Diligence is the technical term for enforcement in Scottish law, it is the steps a creditor can take to get their money back after they have taken court action against you.

Use this fact sheet to:

  • find out what forms of diligence can be used against you;
  • find out what you can do to stop diligence being used against you; and
  • see what action you can take if diligence is already being used against you.

When can creditors use diligence?

Your creditors can use diligence if you have fallen behind with your payments towards a debt and your creditor has:

  • a decree (court order) against you for the debt; or
  • a summary warrant, for debts such as council tax, income tax, value added tax (VAT), and National Insurance.

See our fact sheet:

Council tax recovery.

The rules about how other debts are enforced, for example overpaid state benefits, criminal fines and amounts owing under contracts such as lease agreements, are not dealt with in this fact sheet. Contact us for advice.

What does diligence mean in practice?

In most cases there are seven main forms of diligence which could be used against you. These are:

  • a bank arrestment and action of ‘furthcoming’;
  • an earnings arrestment;
  • an attachment of property outside your home;
  • an attachment of money;
  • an application to the sheriff court for an exceptional attachment order (EAO);
  • an inhibition on the sale of your house and any land or business premises that you own; or
  • diligence on the dependence.

Creditors need to serve a ‘charge for payment’ on you before they can carry out most of these diligences. See the later section What is a charge for payment?.

In the later sections of this fact sheet we describe each of these types of diligence.

What can I do to stop diligence?

Time to pay in the simple procedure

From 28 November 2016, most debts of £5,000 or less will be recovered using the simple procedure. If a claim was made against you before this, the rules will be different. See the next section about time to pay orders.

Under the simple procedure rules, you can apply for time to pay at any time after the sheriff has made a decision and granted a decree, as long as you haven’t been granted time to pay already and have defaulted on this. You will just need to complete a Time to Pay Application form and send it to the court.

Time to pay orders

If the diligence is based upon either a summary warrant for council tax arrears, or a sheriff court decree for a debt of £25,000 or less, then you may be able to apply for a time to pay order. You may also be able to apply if the decree is for a debt of less than £5,000 if the claim against you was made before 28 November 2016.

A time to pay order allows you to repay the debt by monthly instalments, and prevents the creditors using most types of diligence against you.

You cannot apply for a time to pay order for debts relating to:

  • awards in connection with divorce actions;
  • maintenance orders made by a court; or
  • arrears of income tax, VAT or car tax.

Debt Arrangement Scheme

Information:

debt-payment programme

A debt-payment programme will give you protection against your creditors making you bankrupt, or forcing you to pay your debt by using diligence. This protection starts once you have made an application for a debt-payment programme and are waiting for it to be approved.

You may benefit from applying for a debt-payment programme under the Debt Arrangement Scheme. If you are successful in applying for a debt-payment programme, you will make one regular payment to cover most of your debts. This is made to an approved payments distributor who will send the money to your creditors for you. If you keep to the agreed payments, your creditors will not be able to use diligence against you.

It can take a little bit of time to apply for your debt-payment programme. In the meantime, the money adviser who helps you make the application can contact the AiB and confirm that you are intending to apply for a debt-payment programme. This is called an ‘intimation’. Your intimation will then be placed on the DAS register. Once on the register, you will be protected against any creditor action for six weeks and this will give your adviser time to submit your proposal.

See our fact sheet

Debt Arrangement Scheme (DAS).

   

Joining a debt-payment programme freezes interest, fees and charges on your debts. This means you are not charged extra from the date you apply for your debt-payment programme. Interest, fees and charges will continue to be frozen as long as your debt-payment programme is approved and you keep to the payments. If you think that a debt-payment programme might help you, contact us for advice.

What is a charge for payment?

A charge for payment is a formal request in writing, demanding that you pay a debt within a certain period of time, usually 14 days. In most situations, the creditor cannot enforce payment of the debt using diligence until the charge has been served and the time limit stated on it runs out. The charge for payment should be served by a sheriff officer and a witness. In very limited circumstances, it can be served by post.

What is a bank arrestment?

A bank arrestment will freeze your account until you give permission, or a ‘mandate’, for release of an amount to cover either the total debt due, or a lump sum towards it. If you don’t sign the mandate the creditor can raise a ‘furthcoming action’. This would order the bank to release the funds that have been frozen. If the creditor does not raise a ‘forthcoming action’ and you do not agree to release any money arrested, it will automatically be released after 14 weeks.

If your creditor wants to arrest funds you have in a bank or building society account, their agent will usually send letters of arrestment to the  major banks and building societies. If any of them hold an account in your name, your account will be frozen.

Information:

decrees and warrants

For debts where the creditor has got a sheriff court decree against you, a bank arrestment can be carried out before a charge for payment is served on you. For debts where the creditor has got a summary warrant against you, a bank arrestment can only be carried out after a charge for payment has been served on you, and the time limit stated on it runs out.

Sheriff officers may be willing to negotiate the release of some of the money in your account, in certain circumstances. In return you may have to agree to set up a standing order for the remaining debt and give them your employment details. This is to make it easier for the creditor to get an earnings arrestment if you do not keep to the payments you have agreed.

There is a limit on what can be arrested in your bank account.  At present, a minimum of £494.01 must be left free from arrestment. This amount is known as the ‘protected minimum balance’. Also, certain funds such as benefits and tax credits should not be arrested if they can be clearly identified. Contact us for advice.

You may still be able to apply for a time to pay order, or a debt-payment programme, if you haven’t already done so.  See the earlier sections What can I do to stop diligence? and Debt Arrangement Scheme for more information and contact us for advice.

The arrestment will only affect money already in your bank or building society account on the day the arrestment is delivered to the bank.

Extra advice:

opening another account

You can still try to open another account at another bank. We have information about how you can find an instant access bank account. Contact us for advice.

Warning:

other payments

When your bank account is arrested, it stops regular payments such as direct debits and standing orders being made. This can mean that any bills you pay by these methods can fall behind. If this happens to you, contact the organisations that are expecting payments from you so that you can make an alternative arrangement to pay them, and contact us for advice.

What if I have a joint account?

If you have a joint account, the bank will usually freeze (‘arrest’) the full amount in it, apart from the protected minimum balance.

If you and the joint account holder have both paid money into the account and the debt is in your sole name, it may be that only part of the money in the account can be arrested. In other circumstances, the creditor is likely to be able to get the full amount that has been arrested. This area is complicated. Contact us for advice.

What can I do about the bank arrestment?

Remember:

time to pay order

You may still be able to apply for a time to pay order. If this application is successful, it will prevent further diligence being carried out.

In some situations, the bank arrestment may cause you or a member of your household hardship. If this is the case, you could apply to the sheriff to release some of the money under the arrestment. If you are considering this type of application, contact us for advice.

What if I have more than one account with the same bank?

If you have more than one account with the same bank, an arrestment will affect all the accounts you have with that bank. However, the protected minimum balance of £494.01 only applies to one of the accounts. This means that some of your accounts may have the full balance arrested. If you are in this situation, contact us for advice.

What is an earnings arrestment?

Once a creditor has served a charge for payment on you, and the time limit stated on it has run out, the creditor may ask your employer to take regular deductions from your wages to repay the debt you owe. Your employer has a limited time to put the arrestment into practice. The deductions will be made from your ‘net income’. This means the income you have left after taking away tax and National Insurance.

Information:

net income

In some situations, your net income will be the income you have left after any pension contributions have been deducted. If you are not sure whether this applies to you, contact us for advice.

The creditor must send you a Debt Advice and Information Package no earlier than 12 weeks before serving an earnings arrestment. ‘Serve’ means to deliver the documents to you in the correct way. This has to be in the form set by the Scottish Government. It will explain your rights and give you details of how to get advice. If they do not do this, any earnings arrestment will be illegal.

You can find information about how deductions are calculated on the Accountant in Bankruptcy's website www.aib.gov.uk. Alternatively, contact us for a copy of the information.

What can I do about an earnings arrestment?

You may still be able to apply for a time to pay order, or a debt-payment programme. If the time to pay order is granted, it will stop the earnings arrestment.

Alternatively, you may be able to agree with your creditor direct a fixed deduction from your wages. This avoids your employer having to do a separate calculation each pay day.

Some employers can be annoyed at the inconvenience of making the deductions. In some jobs, being in debt may be a disciplinary offence. If you are in a job handling money, an earnings arrestment could put your job at risk. Check your contract of employment.

You may want to use this as a negotiation tactic. Explain to your creditors that if they do an earnings arrestment you may lose your job and then they will get even less money.

Extra advice:

maintenance or child support

This fact sheet does not deal with deduction of earnings orders for maintenance or child support.  If you are threatened with a deduction of earnings order for maintenance or child support, contact us for advice.

Important:

applying for a time to pay order

You will not be able to apply for a time to pay order if the debt has previously been subject to a time to pay direction and it failed because you did not keep up with the payments. However, if you previously applied for a time to pay direction and your application was refused, you can still apply for a time to pay order.

   

What is an attachment of property outside my home?

A sheriff officer acting on behalf of the creditor may decide to try and arrange the seizure and sale of some items of your personal property. They can only do this once you have been sent a charge for payment and the time limit stated on it has run out. The creditor’s right to try to seize property outside your home is different to their right to seize property inside your home.

  • An ‘attachment’ of personal property is where sheriff officers seize property outside of your home.
  • An ‘exceptional attachment order’ (EAO) is where a sheriff officer seizes property inside your home. This should be a last resort and the creditor would have to apply to the sheriff court before they can do this. See the later section What is an exceptional attachment order? for more information.

You should leave the attached items in the place where they were attached. It is a breach of the attachment for you to remove, damage or give away attached items. If you breach an attachment in this way, the sheriff officer would be able to demand the value of the item or to attach other items. A breach of the attachment may be treated by the sheriff as contempt of court.

The creditor should serve a Debt Advice and Information Package on you no earlier than 12 weeks before taking steps to carry out the attachment. This has to be in the form set by the Scottish Government. It will explain your rights and give you details of how to get advice. The sheriff officer can deliver this when they visit your house to carry out an attachment.

Warning:

buildings that can be entered

The sheriff officer cannot enter your home to enforce an attachment. However they can enter places such as a garages or outhouses, even if they are locked, and can enter any of your business premises. Contact us for advice.

Information:

the summary warrant

Before making an attachment, the sheriff officer must show you the summary warrant and give you a last chance to pay the debt and expenses. 

What cannot be attached?

Sheriff officers cannot attach:

  • any tools of trade, books or other equipment that you reasonably require to carry out your profession, trade or business, up to a total value of £1,000;
  • any vehicle you reasonably require up to the value of £3,000;
  • a mobile home if it is your only or main residence; or
  • any tools or other equipment reasonably required for the purpose of keeping your garden or yard in good order.

What can I do to about an attachment?

Once the attachment is complete, the sheriff officer must give you a document giving details of the goods attached, and the value placed on them. You have a right to buy back the items at that value. This is called ‘redeeming’ the goods.

Extra advice:

14 days to redeem

You have 14 days from the date of the attachment to redeem the items.

  • If the sheriff officer attaches something which is normally exempt, you must get advice immediately. You may have to apply to court to challenge the attachment. This is done using form 13. Contact the sheriff's court for a copy.
  • If you think something has been undervalued, you can apply to the court at any time before the auction using form 4 Contact the sheriff's court for a copy.
  • Where your car has been attached (because it is valued at more than £3,000), it is possible to apply to have a sale within 14 days and for you to be given back £3,000 to buy a second-hand replacement. You need to use form 11 for this. Contact the sheriff's court for a copy.
  • If the item belongs to a third party, they can apply to the court for its return using form 18. Contact the sheriff's court for a copy.
  • Items which are jointly-owned (for example, a car) can be attached. This includes items owned by you and a partner who you live with, and items owned by you and your business partner.  However, you can sometimes avoid the sale of an item that is jointly-owned by you and a partner that you live with, by arranging for them to buy your share of the item. Form 19 should be used for this. Contact the sheriff's court for a copy. Alternatively, the other person can apply to the court to ask the sheriff to release the jointly-owned goods on the grounds that their sale would be ‘unduly harsh’ to that person. Form 20 should be used for this. Contact the sheriff's court for a copy.

Information:

buying back the goods

If an attachment goes ahead there is nothing to stop a friend or relative from buying the goods at the sale. If they lend you the goods back, they remain their property and cannot be re-attached for your debt.

Warning:

sale of attached item

Once an item has been removed by the sheriff officer, it cannot be sold for at least 7days .

You must be told the date and where the sale of your items will take place. The sale will not take place in your home.  Instead, goods will be taken to an auction room. You may still be able to buy the goods back at the value set by the sheriff officer before the sale. You will still be liable for any debt that is left over once the goods are sold.

Court forms

Important:

contact us

If you need help with court forms, contact us for advice.

There are set forms that you should use when making an application to the sheriff court about problems with the attachment procedure. The forms are available from your local sheriff court. The court should tell you which form to use. The forms can also be found on the court website www.scotcourts.gov.uk, or at a local CAB or law centre.

What is a money attachment?

This is a type of diligence where the creditor instructs a sheriff officer to seize money or cheques that you hold. A money attachment can only be used after:

  • the creditor has got a summary warrant or decree against you;
  • you have been served with a charge for payment;
  • the period for payment that is stated in the charge for payment has run out, and you have not paid the debt; and

  • where you are an individual, the creditor has provided you with the Scottish Government’s Debt Advice and Information Package.

A money attachment cannot be made in relation to money that is kept within your home, or in a situation where an arrestment of your bank account would be possible. It is a type of diligence that could be used by the creditor if you operate a business which deals mainly in cash.

Within 14 days of the money attachment being carried out, the sheriff officer must present a signed report of money attachment to the sheriff in a set format. A copy of the money attachment report must also be given to:

  • you;
  • the creditor; and
  • any other person who has disputed the ownership of the money.

Information:

the sheriff can refuse

If the report is not made in the required timescale, or on the correct form, the sheriff can refuse to accept it. If this happens, the attachment will no longer have effect and the money that has been attached must be returned to you by the sheriff officer.

In order to release the money that has been attached, the creditor must apply for a ‘payment order’ within 14 days of the date of attachment. If the creditor does not do this in time, the money attachment will automatically end.

How can I challenge a payment order?

If you want to challenge the payment order, think about whether you have good grounds to do this. Good grounds could include the following.

  • You do not own the money that has been attached.
  • The money attachment is ‘unduly harsh’.
  • The money attachment has not been carried out properly.

You must apply to the sheriff court within 14 days of the creditor’s application for the payment order being made. There will be a hearing with a sheriff. If you want to challenge the application on the grounds that you do not own the money that has been attached, you will need evidence to prove this. The sheriff could order that a money attachment should no longer have effect and that the money should be returned to you.

What is an exceptional attachment order (EAO)?

This is a type of diligence which creditors can try to use if they think that you have property in your home which is valuable enough for them to attach and sell at auction.

The creditor should only apply for an EAO as a last resort. They must have first sent you a charge for payment and the time limit stated on it must have run out. Unlike an attachment for items of property outside your home, the creditor has to apply to the sheriff court for an EAO.

Before granting an EAO, a sheriff will have to consider a number of factors, including:

  • whether you have already received money advice;
  • any agreement between you and the local authority to settle the debt; and

  • any statement you have made to the court about your assets, their value and your overall financial circumstances.

Once the sheriff has considered all this, they will then look at the following questions.

  • Is a visit by a money adviser required to establish your financial position?
  • Has the creditor taken responsible steps to negotiate a settlement of the debt?
  • Has the creditor tried to recover the debt in other ways?
  • Is there a reasonable chance that the amount obtained at an auction of your non-essential assets would be equal to the expenses of the attachment, plus £100?
  • Is it reasonable in all the circumstances to grant the EAO?

What cannot be attached in an EAO?

Warning:

if you do not reasonably need an item

If the sheriff officer thinks that you do not reasonably need an item, they can still choose to attach it. If this happens, contact us for advice.

The items that should not be attached in an attachment should also not be attached in an EAO. However, there are some additional items that should not be attached in an EAO if these are reasonably required by a member of your household.  These include:

  • clothing;
  • bedding;
  • basic household furniture;
  • a refrigerator; and
  • cooking equipment.

This is not a complete list of the items which cannot be attached.  If you are unsure whether something should be attached or not, contact us for advice.

What happens to the items once they are attached?

Sheriff officers will usually remove any item which is attached immediately. If the item is not immediately removed, they must give you at least seven days notice of the date arranged for the removal of the item.

What can I do to challenge an EAO?

You have the right to buy back (redeem) the goods at the value set by the sheriff officer within seven days of the date of the attachment. You also have an opportunity to challenge the EAO.

Within seven days of the attachment, you can apply to the sheriff court requesting that the items should be released from the EAO. You need to use form 28. Contact the sheriff's court for a copy.

You can do this on the grounds that:

  • the attachment of an item is not ‘competent’ (this means that the correct procedures have not been followed and the EAO is not valid);
  • an auction of attached items would be ‘unduly harsh’;
  • goods are of sentimental value and are worth less than £150;
  • the items were attached at a lot less, or more, than their true market value; or
  • the value of the items is less than the likely costs of an auction of the goods.

What is an inhibition?

Information:

Debt Advice and Information Package

If the creditor wants to get an inhibition against you, they must send you a copy of the Scottish Government’s Debt Advice and Information Package.

An inhibition is a court order preventing you from selling property such as your house and any land or business premises you own. This is to avoid you disposing of a major asset and not paying your creditors. A creditor needs to get a decree against you before using this type of diligence. However, they do not need to serve a charge for payment on you. The inhibition lasts for five years and then runs out, but the creditor could ask for it to be renewed. The inhibition will also stop you from taking out further borrowing secured on your property.

If you want to sell your house or business premises, you will have to give permission for your solicitors to take the amount owed to the creditor from the proceeds of the sale of the house. This is after paying the mortgage, the estate agent’s, advertising and the solicitor’s fees. The solicitor will need to pay the money to the creditor in return for the creditor lifting the inhibition and allowing the sale to go ahead.

What is diligence on the dependence?

‘Diligence on the dependence’ is an option that creditors can use to protect their interests while they are waiting for the court to grant a summary warrant or decree against you. In simple procedure actions this may be called a provisional order.

Once the creditor has started court action to recover money from you, they can apply to the court for an order to:

  • arrest money in your bank or building society account;
  • put an inhibition on your home or business premises to stop you from selling it, or from securing another debt on it; or
  • stop you from selling or getting rid of certain goods (called an interim attachment).

If you think that the creditor is trying to take this action against you, contact us for advice.

Sequestration

See our fact sheet:

Bankruptcy.

A creditor, or group of creditors, could also try to sequestrate you (make you bankrupt). They may be more likely to do this if you have valuable property or other assets that you own which would be sold in bankruptcy to raise money to pay your creditors.

You must owe the creditor, or group of creditors, at least £3,000 for them to be able to make you bankrupt. They must also show that you are ‘apparently insolvent’. This is a legal term meaning that you are viewed as being unable to pay your debts as they fall due. The main circumstances in which you will be apparently insolvent are as follows.

  • The creditor has got a summary warrant or decree against you, sent you a charge for payment and you have not paid the debt within the time stated on the charge for payment (usually 14 days).
  • The creditor has sent you a ‘statutory demand’ and you have not responded to it within 21 days by paying or ‘denying’ the debt. A statutory demand is a legal request for money. If you receive a statutory demand, contact us for advice.

Making yourself bankrupt could be an option for dealing with your debts and stopping creditors using diligence against you. However, bankruptcy is a serious step. Your home, assets and employment could be at risk. If you are considering bankruptcy, contact us for advice.

Can I complain about sheriff officers?

Warning:

effect of complaint

Even if you successfully complain about a sheriff officer, the action the creditor has taken against you may not be stopped or reversed.

All sheriff officers are required to be members of the Society of Messengers-at-Arms and Sheriff Officers (SMASO). You can complain to SMASO about the way a sheriff officer has acted. See Useful contacts at the end of this fact sheet for their contact details. Complaints may be that the sheriff officer has:

  • behaved in an unreasonable way; or
  • exceeded their powers.

Alternatively, you can complain to the Sheriff Principal for the area within which the sheriff officer is acting. If the sheriff officer is found guilty or admits the offence then they could be suspended, lose their job or fined.

When you complain to SMASO or the Sheriff Principal, complain in writing and include details of the sheriff officer and which creditor they have been employed by. Provide any evidence that you have to support your complaint.

If you are considering complaining about a sheriff officer, contact us for advice.

Useful contacts

Society of Messengers-at-Arms and Sheriff Officers (SMASO)   
Forth House,28 Rutland Square,
Edinburgh
EH1 2BW
Phone: 0131 292 0321
Email: admin@smaso.ednet.co.uk
www.smaso.org